The American College of Financial Services recently put out a retirement income literacy quiz, and 75% of the participants failed it.
Less than 1% earned an A, 5% earned a B, 8% earned a C, and 13% earned a D.
And the questions were not rocket science…
“When is the best time to file for Social Security benefits?”
“When does a reverse mortgage have to be repaid?”
This is not tough stuff! All of these answers can be found by doing a simple Google search.
The eye-opening part of this study was that 61% of participants reported that they had high levels of retirement income knowledge. (Clearly, this was before they saw their quiz results.)
The most telling—and encouraging—result was that 40% of participants with a graduate degree or higher passed. But only 9% of those without a college degree passed.
While 40% is not a great number for those with advanced degrees, it’s obvious that education plays a large role in financial literacy.
But here’s the crux of the financial literacy issue…
The less you know about money, retirement issues, and retirement services (Social Security, Medicare, etc.), the more likely it is you’ll miss out on the money and opportunities owed to you.
Many of the quiz participants did not understand key concepts, such as the long-term care basics, when to file for Social Security benefits, or how much to withdraw each year.
According to the study, 40% of those who contribute to an employer retirement plan reported that they had no idea how it is allocated.
And we can’t continue to blame the schools alone for our lack of money understanding or the dire straits many find themselves in when it’s time to retire.
The boomers are the worst-prepared generation ever to enter retirement in the United States. A big part of the blame does fall on the education system that has done nothing to prepare our kids to manage, save, or handle money. But all the research says the boomers themselves have done virtually nothing to help themselves.
The scariest part of the American College of Financial Services quiz is that I don’t think it accurately reflects our national financial literacy.
I expect it is much lower than what the results showed.
The free information on the internet alone is enough to help most earn at least a passing grade on this kind of quiz. But you have to make the effort.
More than 1,200 Americans between 60 and 75 years old participated in the study. And they all had at least $100,000 in investable assets.
That’s a nice nest egg, but think about how much larger it could be with more education and more effort…
It’s your retirement—and it’s your responsibility to make it great.
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